Form a Florida LLC

Florida Is Business Friendly

Each year, Florida forms more than 150,000 new LLCs, which is the second highest of any state. In addition, more out-of-state owners form Florida LLCs than form LLCs in any other state except one. Florida has over 625,000 active LLCs. Most are owned by members who are domiciled in Florida for both active businesses and passive asset ownership (real estate, boats, etc.). Many LLCs decide to incorporate in Florida for a variety of reasons.

Florida Has Low Taxes and Fees

Unlike California, Texas, and New York, which are the three largest states in population and gross domestic product, Florida has low taxes and fees, and flexible regulation. Florida ranks fifth in business tax climate, but Texas ranks ninth, California ranks forty eighth, and New York ranks fiftieth.

Unlike a corporation, a Florida LLC is considered a "pass through" entity for income taxes. Instead of taxing profits at both the company and individual level, any profit will "pass through" the LLC to the tax returns of individuals. As an added benefit to this, business conducted in Florida by individuals domiciled in Florida is not subject to any personal income tax, meaning in this case that members of a Florida LLC would only have to pay federal income taxes on LLC income. Florida does have an annual fee for LLCs, but it is very low relative to other states (a flat fee of $138.75). The filing fee to form a Florida LLC is $125.00.
In addition, Florida does not tax business inventories, and it does not impose a franchise fee. Texas taxes business inventory. California taxes the tangible personal property a business owns, other than business inventory. But Florida does tax the tangible personal property a business owns at the local government level (if it is located in Florida).

Florida Has a Legal System with Experience in Corporate and Commercial Law

Florida's legal system has experience in business entity and commercial law. For example, many parties choose Florida as the forum for maritime and admiralty law disputes. Florida's LLC statute states that LLC managers cannot be held personally liable for money damages for their decisions unless their decisions violated a criminal law, involved a transaction in which they obtained an improper personal benefit, or involved willful or wanton misconduct.

On the other hand, if members want to create additional protections against managers' or members' breaches of duties to the LLC, the Florida LLC statute allows them to expand their duties and liabilities in the LLC operating agreement. Therefore, the Florida LLC statute gives LLC members contractual freedom to customize their duties and liabilities.

Florida LLCs Have a Flexible Business Structure

LLCs are governed by operating agreements that are comprehensive in arranging the affairs of the business to match the members' wishes. Conversely, corporate bylaws that govern corporation elections are limited in scope and do not include restrictions on transfer that most small business owners desire to keep out unwanted partners. Therefore, operating agreements are much more flexible, allowing for elimination of certain duties and formal "dance steps" that corporations require. Formalities such as annual meetings with minutes do not need to be followed by LLCs, which removes much of the complication and bureaucracy associated with managing a business.

Florida LLCs Keep Creditors From Taking Over Your LLC's Management

In Florida, creditors of members in LLCs with multiple members are limited to the charging order remedy as an exclusive remedy. If a creditor of one member of an LLC attaches membership interests of the member, the creditor does not gain any voting power. The lien on the membership interest only entitles the creditor to the distribution of any profits associated with the interest.

Florida has a slightly different charging order law for single-member LLCs. Following a decision by the Florida Supreme Court and a subsequent law change by the Florida legislature, a creditor may only foreclose on an LLC instead of obtaining a charging order only if the creditor can prove that the charging order will not be sufficient to satisfy the debt in question.

Owners of Florida LLCs Do Not Need to be Disclosed

Unlike other states, Florida only requires that LLCs provide a list of managers on the Articles of Organization. This means that Florida does not require the names of the members of the LLC to be on public record, unless they are listed as managers.

Florida LLCs can have foreign members, while still retaining their status as a "pass through" entity for taxation. Other business structures, such as corporations, do not permit the combination of foreign owners and "pass through" entity status.

Forming LLCs Segregates Your Personal Savings from Liabilities Associated with Your Business, Vacation Home, Investment Properties, Boats, and Recreational Vehicles

Many people use Florida LLCs to segregate their personal assets from their businesses, vacation homes, investment properties, boats, recreational vehicles, and other assets. While an LLC has the same powers as an individual to carry out business and further its interests, the LLC and the individual members are distinct entities. This means that any debts or obligations that the LLC incurs during business are not enforceable against the personal assets of any members or managers of the LLC.

Segregating assets in an LLC protects members by limiting their personal liability for claims against the LLC to the value of the LLC's assets. For example, a person who owns a lawn mowing business can use an LLC to protect his or her personal assets from the claims of customers and third parties who may be injured by equipment accidents, business vehicle accidents, or other accidents. Moreover, a business owner can use an LLC to protect his or her personal assets from the claims of creditors if the business is struggling in a slow economy. Likewise, a person who owns a vacation home in Florida can use an LLC to protect his or her personnel assets from the "premises liability" claims of people who may trip on the home's sidewalk, fall into its swimming pool, or be hit by a branch falling from its trees. If this property was owned by an individual, then the individual's assets would be vulnerable to any related lawsuits; however, vesting the property in an LLC would give the individual control while shielding their own assets from any related lawsuits.

Forming an LLC Can Avoid Probate in Many States

Many people form Florida LLCs to avoid probate of their assets in multiple states. Probate is the court-supervised process by which a deceased person's assets are distributed according to his or her will. Real estate parcels are categorized as "real" property, not "personal" property. By law, real property must be probated through the state court system in the state where the parcel is located, but personal property does not have to be probated through the state court system where the personal property is located. Therefore, even if a person who owns Florida real estate does not live in Florida, when he or she dies, the real estate will have to be probated in Florida. This means the deceased person's estate may have to pay to go through the probate process in two or more states.

Unlike real estate, membership units in an LLC are categorized as personal property. Therefore, when a person who does not live in Florida forms a Florida LLC and buys Florida real estate through the LLC, he or she can include the membership units in his or her will, and the units may be probated in the same state where his or her other personal property is probated. In this way, forming a Florida LLC may be part of an estate planning strategy that reduces the cost of administering the estate and preserves

Choosing a Name

To begin forming a Florida LLC, you must first decide what the LLC will be named. The name must satisfy a few requirements. First, the name cannot conflict with any other company names or trademarks in the state of Florida. The website of the Florida Division of Companies has a business search to help meet this requirement. The name must also contain some designation that the company is an LLC. Finally, the name cannot imply any affiliation with the government, a profession that requires a special license, a bank, or any activities unauthorized by law. Unlike many other states, Florida does not have a procedure for reserving an LLC name prior to filing the formation documents.

Choosing a Registered Agent

In order to form an LLC in Florida, you need a registered agent in Florida with a valid Florida mailing address. The duties of a registered agent require trust and diligence, which is why many Florida LLCs choose a reputable incorporation firm, such as Agents and Corporations, Inc. to serve as their registered agent. These incorporation specialists can be hired to complete the LLC formation process.

Drafting and Filing Articles of Organization

Drafting and Executing an Operating Agreement

While the articles of organization will officially form the LLC in Florida, the operating agreement is vital to the existence of an LLC. The operating agreement is what governs the operation of the LLC, and will include provisions such as distribution of profits and ownership interest, transference of interest, dissolution procedure, management provisions, and liability and indemnification, among others. The operating agreement constitutes a contract, and must be signed by all members to be legally binding. Operating agreements can be amended in the future to reflect various changes, but having a strong operating agreement is necessary for an LLC. While it is possible to draft you own operating agreement, many LLC's choose to hire professional incorporation firms to draft an operating agreement. The professional experience of an incorporation firm such as Agents and Corporations, Inc. allows them to include provisions to avoid many future conflicts.

Florida law does ban certain provisions from being excluded in LLC operatingagreements. These bans regard reductions in duties of members and managers, including the duty of loyalty, duty of care, and obligation of good faith and fair dealing. Additionally, the operating agreement cannot restrict rights of access to records, restrict rights of anybody other than managers, members, and assigns, or vary the requirements for winding up the LLC.